Risk Management & Renewal Planning

In New Zealand, the 3 Waters assets have a replacement value worth around $36 billion. Approximately one quarter of the assets are more than 50 years old and 10 – 20% of graded assets require renewal. It is believed that the condition of a large portion of assets within the country are ungraded, therefore the true investment required to maintain these assets is not fully understood.

Along with many other countries, New Zealand is facing a looming infrastructure renewal ‘wave’ which is not well-defined in quantum and timing. Funding the renewal of our 3 Water assets will be an ongoing challenge for Local Authorities. Better information and strategies for the use of that information is needed to confirm funding required for water infrastructure in the LTP’s, manage risk and make decisions to get the best results. Many local authorities are looking for strategies to manage the affordability of rates, including optimising asset renewals and delaying renewal work, expecting assets to last longer than they had originally anticipated. Such approaches should have two outcomes: a deferral of renewals to future period and a decrease in the depreciation expense, reflecting the expectation of a longer asset life.

Undertaking a risk based strategy for profiling the renewal of assets is considered to be good asset management practice. Using accurate, reliable data on the condition and performance of assets to determine the likelihood of failure, along with on-going monitoring and prioritisation, based on criticality, should be used to make good asset management decisions to determine effective, renewal and retirement strategies for long term planning and investment funding. Research has shown that optimisation analysis can result in between 15% and 25% long term cost saving compared to reactive maintenance and renewals.